Bank of America Tanks Following Earnings

If you were to look at Bank of America's (NYSE: BAC) shares today, you'd think they really whiffed it in the fourth quarter of last year. The nation's second largest bank by assets reported earnings for the three months and 12 months ended Dec. 31. Following the news, shares of the bank are down nearly 4%.

As expected, B of A's net income was decimated by legal related costs. All told, approximately $4.7 billion was paid to settle claims with Fannie Mae and banking regulators related to issues from the financial crisis. This left a mere $732 million, or $0.03 per share, in profit for the quarter.

If you've been following earnings season thus far, you know this figure comes up far short of B of A's closest competitors. Last week, Wells Fargo reported record earnings as its mortgage business continues to flourish. And earlier this week, JPMorgan Chase did the same, notching historic revenues despite a $6 billion charge related to the London Whale scandal.

Despite the disparity, B of A made progress in a number of areas. In the first case, it made a profit despite the massive write-offs. Second, it's now effectively eliminated any remaining liability associated with Fannie Mae -- the biggest outstanding legal claims it faced. Third, as CEO Brian Moynihan promised, it's begun growing its mortgage operations again. And finally, it added to its record capital levels, finishing 2012 off with a 9.25% Tier 1 common capital ratio under Basel III.

For shareholders of B of A, patience remains the principal virtue, as the bank continues to atone for the mistakes of its past. It's important to remember, however, that these mistakes will only plague the banking behemoth for so long. At some point, its legacy issues will be behind it, and it's then that shareholders will finally reap the benefits of their commitment to this still-ailing lender.

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